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The US labor force reached a total of 163.4 million in July, a record high, after adding 164,000 jobs. Jobs growth was actually below expectations of 165,000 - 170,000, although the data still points to a robust labor market.

Key Takeaways

• The Labor Department reports that payrolls increased 164,000 during July, lower than market projections as well as the previous month’s figure of 193,000, originally reported as 224,000.
• Labor force participation came in at an all-time high of 163.4 million. The slowdown in growth coupled with the all-time high could indicate an ever-tightening labor market.
• The unemployment rate remained at 3.7% as expected.

Wages rose 3.2% annually, slightly above expectations, and average weekly hours dipped to 34.3. Payrolls rose in line with expectations for the month. The unemployment rate remains at 3.7%, just 0.1% higher than a 50-year low which likely would have been reach ed had it not been for the influx of 370,000 new workers to the labor force.

The so-called “real” unemployment rate, which accounts for discouraged workers and the underemployed, dropped to the lowest level since December 2000 at 7%. Companies are continuing to hire despite the evident economic slowdown seen worldwide and the concerns of a domestic slowdown in the US.

Jobs Data

Professional and technical services added 31,000 new jobs. Healthcare rose 30,000, social assistance saw 20,000 new jobs, and financial activities rose 18,000. Even the beleaguered manufacturing industry, now at a three-year slump in terms of factory activity, added 20,000 jobs, although 1,5000 jobs were lost in motor vehicles and parts. Mining also dipped by 5,000.

The previous month’s supposed surge of 224,000 jobs was revised down significantly to 193,000, and May’s figure was revised down 10,000 jobs to 62,000, cutting 31,000 from the original estimates.

The report comes amid uncertain times in the US, with mounting concerns of a recession looming in the coming year. The trade war with China continues to escalate, and nations around the globe are posting weaker GDP growth amid an international economic slowdown.

The trade war has had a particularly negative impact on business confidence and manufacturing, with many manufacturing indices ticking toward contraction.

July Employment Report: 164,000 Jobs Added, 3.7% Unemployment Ratehttps://t.co/s1x7CSs5hn pic.twitter.com/fDe4X5p4eU

— Bill McBride (@calculatedrisk) August 2, 2019

Expert Outlook

Nancy Curtin, chief investment officer at Close Brothers Asset Management, said

“The US jobs market is in a good place. Unemployment has stayed flat while productivity goes from strength to strength. Moderate wage growth will give the Fed pause for thought when it comes to further monetary easing but, so long as productivity gains continue to gather pace, inflation shouldn’t be cause for concern.”

However, while Curtin sung the praises of the jobs market, her view on business spending was more bleak, describing the situation as “worrying.”

“Corporate investment is low, with firms sitting on cash and engaging in share buy-backs rather than investing in the labor market. Digital transformation spending is contributing to productivity and should be encouraged, but with the trade war escalating and global slowdown spiralling it’s no surprise that business confidence has slumped.

It’s too soon to say what impact the new tariffs will have on the US economy and labor market, but Powell will need to be pragmatic and flexible if he hopes to sustain the expansion.”

Market Reaction

Gold last traded at $1,440.52/oz, up 1.38% on the day which saw a high of $1,445.34/oz and a low of $1,418.23/oz following market turbulence after remarks made by Fed Chairman Jerome Powell. As the Fed introduced the first rate cuts in a decade, Powell stated that rate cuts were unlikely to continue, defying market expectations and creating bearish sentiment in the precious metals markets. However, that seems to have subsided with gold ticking steadily upward in today’s session.